Board urged to have Morgan Stanley stop 'interest rate swaps'

A number of public speakers, including students, faculty, and Peralta Federation of Teachers President Matthew Goldstein, urged the Peralta Board at its Dec. 6 meeting to demand Morgan Stanley cancel interest rate swaps on bonds issued by Peralta.

Goldstein said interest rate swaps are costing the district $1.6 million a year, the equivalent of 320 classes.

Interest rate swaps were initially sold to the district with idea of protecting the district from fluctuations in variable interest rates, thus saving money in the long run. The district swapped its adjustable rate with the bank for a fixed rate, locking the district into a single interest rate not subject to the ups and downs of the market. The risk of skyrocketing interest rates seemed to be avoided.

However, when the banks failed and the economy crashed, variable interest rates dropped to nearly zero, leaving the Peralta district to pay interest rates much higher than it otherwise would have. The difference between actual interest rates —and the fixed rate the district swapped for—leaves the district to pay $1.6 million in additional interest per year.

Goldstein, along with the other speakers, requested that the board encourage Morgan Stanley to "drop the swap" and return the district bonds to a variable interest rate. In a letter to John Sheldon, executive director of Morgan Stanley, Goldstein said, "Morgan Stanley no doubt has an interest in establishing itself as a responsible and responsive corporate citizen," beseeching the bank to make a statement that education and community development come above corporate profits.

The speakers also requested that dealings between banks and the board become more transparent. The group appealed to the board that a representative from one of the protesting groups be present at a meeting with Morgan Stanley scheduled for Dec. 14, and requested that saved money from dropping the swap be funneled directly to classes, and that all future meetings and discussions with Morgan Stanley be made public.

Peralta Trustee President-elect Cy Gulassa assured the speakers, "We hear very clearly what you are saying."